Cut public jobs with a scalpel, not a chainsaw

 

OPINION:IF THE Government is determined to even achieve its short-term public sector efficiency targets by way of redundancies it must lay-off 11,000 people almost immediately, writes Tony O'Brien

However, in reality, the State should be looking at savings well in excess of the three per cent outlined by the Department of Finance. This target aims to balance the budget for the next year and does not take account of the real potential for efficiency gains.

If tackled correctly we could be aiming for efficiencies of 10 per cent, which is equivalent to just over 36,000 positions.

This might appear to be a very large number but the same number of people from the private sector are likely to lose their jobs between now and February.

The past two weeks demonstrates the difference in approach between the two employment sectors. In one fell swoop Aer Arann completely changed its business model by laying off one quarter of its workforce, as Aer Lingus faces protracted and painful negotiations to try and achieve its very-necessary efficiency goals.

Similarly, this week RTÉ announced that it was targeting €25 million in savings but insisted there would be no forced redundancies among its 2,300 permanent staff. Meanwhile TV3 has been cutting staff for some time in reaction to the massive fall in advertising on television.

In reality, RTÉ is saying that it will only look at staff efficiencies as a last resort. This doesn't mean large numbers of jobs will not be lost as a result of RTÉ's savings.

Independent television production companies are already bearing the brunt of the advertising downturn. Some of these producers have already laid off more than half of their full-time workforce and their situation is likely to get worse.

RTÉ will, effectively, simply transfer redundancies from the public sector to the private sector.

Improved efficiency in the public sector has been like a holy grail, but the search comes more to the fore in times of economic difficulty such as now.

In Ireland, we seem to approach problems with a combination of very general interpretations on the one hand and a series of blunt instruments for cutting costs on the other, such as targeting the entire public sector with a 3 per cent reduction in staff costs or a 50 per cent reduction in contracted services.

While such approaches may appear decisive, in practice the use of blunt instruments often means that it is the efficient organisations that suffer.

The public sector employs over 363,900 people, or 16 per cent of the national workforce. Of these, only 38,400 are civil servants, and by far the largest group of public service employees - 112,800 or 31 per cent of all public service employees - work in the health area.

Public service staff numbers have grown by almost 30 per cent since 1995, but this has been primarily in health and education.

Employee numbers in health have grown by 73 per cent, while education numbers are up 42 per cent on 1995 levels. When these are excluded, there has been just a 5 per cent increase in public sector employees in all other areas. This is very small compared to the national labour force, which saw a 45 per cent increase from 1995 to 2006.

So a blunt target of 3 per cent may hurt the efficient, and not provide better overall efficiency.

If we want to achieve efficiency in the public sector, then it's essential that we do four things.

Firstly, we should first look at the role, functions and outputs of every part of the public service.

The search for efficiency can be diverted too easily when organisations start talking about the outcomes they generate and not outputs. Outputs can be clearly defined, such as public sector houses; whereas outcomes can be achievements such as improved social integration. Anything can be justified if we focus on outcomes; true efficiency starts with deciding what outputs we need to generate those outcomes.

The second task is to ask how outputs could be provided most efficiently. This could be by the public sector; the private sector; the private sector acting as sub-contractor to the public sector or, in particular areas in the social sector, by voluntary bodies.

Thirdly, we should look at how public sector bodies organise themselves, particularly in those cases where there is a contact with the customer. Why is it that in many customer service areas of the public sector the more experienced an employee becomes the further away from the customer he or she tends to be? What could be achieved if customers could access the right people that can make decisions? While experienced senior people may have higher salaries, very often they need far less time to deal with a situation, and can be far more cost-effective.

The public service is used to benchmarking - for salaries. Benchmarking key operations such as finance or capital project management would be a very useful - and for the taxpayer - a very rewarding exercise.

Finally, we need to have sufficient flexibility to allow the public service to reduce staff where and when it is necessary. Real long-term efficiencies are best generated by focusing on the areas where savings are most likely to be achieved and being able to do what is necessary to achieve them.

Tony O'Brien is head of business consulting for accountancy firm Grant Thornton. He is speaking in a conference on efficiency in the public sector today at Dublin's Conrad Hotel, hosted by Public Affairs Ireland. Other speakers include Minister of State Martin Mansergh, secretary-general of the Taoiseach's department Dermot McCarthy, Edwin Lau of the OECD, TCD economist Sean Barrett, and Comptroller and Auditor General John Buckley.